Bitcoin mining operators facing governmental challenges in China

It is reported that out of fears of excessive power consumption and financial risks, local governments around China are now taking action to disapprove, shut down or ban bitcoin mining operations. According to China’s First Financial report, even though the Chinese central government did not request a deadline for the Bitcoin mine shutdown, government’s attitude towards regulating bitcoin production are gradually changing; canceling electricity concessions at the mine sites are happening in some provinces, and local regulator are getting more concerned about Bitcoin mine’s huge electricity consumption, taxes, power generation and environmental issues.

The central government early this year has instructed provincial governments to “actively guide” the enterprises within the local jurisdiction to withdraw from the cryptocurrency mining practice. The government directive pointed out: “The Bitcoin mining industry has consumed a lot of resources while also fueling the speculation of ‘virtual currency’. The Bitcoin mining business runs counter to governmental efforts to ban illegal virtual currency investment and exchanges; the government intends to safeguard against financial risks and curb deviations from the real economy activities.”

China currently produces 70% – 80% of the world’s Bitcoin supplies, mining operators are mainly in Xinjiang, Inner Mongolia, Sichuan, Guizhou and Yunnan provinces where power rates are relatively cheaper. Under the increasingly strict supervision by government, many miners are considering to relocate offshore, such as moving to Iceland and North America.

Low-cost electricity and low-temperature climate are the environmental requirements for cryptocurrency mining, so Canada, Iceland, Eastern Europe and Russia have also become a gathering place for more mining operations and pools.

According to Chinese authoritative sources mentioned, the power consumption of Bitcoin mining is huge. The annual electricity consumption of mining could be used by 50 million households in China. There is also a problem of waste of resources and environmental pollution.In addition, some Bitcoin mines have problems such as fire safety and excessive noise. More local governments under pressures from Central and provincial governments are no longer welcoming Bitcoin mining businesses.